The Hindu Business Line : Tech Tools

I do online trading through a reputed company and the software is good. Suppose I buy 50 shares at a price of Rs 100 and I do not want to lose Rs 3 per share, how to put the stop loss? When I punch in the buy order and put in the stop loss of Rs 3 per share, it does not get triggered at the price of the stop loss. How should a scrip be shorted? Am I supposed to punch in a sell order and buy order simultaneously? If so, tell me how with an example. Dr. Mohandoss

When a stop loss is punched in to the system during online trading, it does not always get triggered at the exact level that is punched in. The minute the price touches the stop loss level, the order converts in to a market order. A market order is an order to buy or sell the share at the current market price. So, the order is executed at a level nearest to the stop loss order.

Suppose you have bought a stock at Rs 100 and have punched in a stop loss of Rs 97. When the price touches Rs 97, the stop loss order will convert into a market order. So your buy order will get squared at the level at which the next limit order is positioned. It can be Rs 96.5 or Rs 96 or Rs 95, depending on the limit order book.

One way of ensuring that the stop loss does not get executed too far away from the stop loss level punched in to the system is by keying in a stop limit order as well. This requires two threshold prices to be specified: one is the stop loss and the other is a stop limit. In the above example, if you had punched a stop loss at Rs 97 and the stop limit at Rs 96. It will ensure that the stop loss does not get executed below Rs 96.

While shorting a scrip, the buy order should also be punched in as a stop loss. If the share is sold at Rs 100, place a stop loss buy at Rs 103.

It is better to wait for the original order to get executed before punching in the stop loss order. In some circumstances, the original order might not get executed and one might be left stranded with a reverse position if the stop loss order gets executed instead.

Which values should be used for plotting the MACD? Atul Madhursinh Ramaiya, P. Chandra

The moving averages commonly used for calculating the MACD are the 12-day and 26-day exponential moving averages. For short-term analysis, plot the MACD on the daily chart. For long-term analysis, plot the MACD on the monthly chart with 12-month and 26-month exponential moving averages and for getting the MACD for medium-term analysis, you can use the weekly chart and the 12-week and the 26-week exponential moving averages.

Lokeshwarri S. K.

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